Supply chain woes costing UK businesses £12 billion annually

Supply chain issues have cost the UK and eurozone around a year’s worth of GDP growth. According to new analysis, the UK currently forfeits more than £12 billion in lost sales due to the disruption.

Over the last decade, companies have repeatedly been warned that a failure to secure their supply chains would lead to material shortages. Long before the impacts of the global energy crisis, the war in Ukraine, the pandemic lockdown, or even the chaotic conclusion of the Brexit process, a mounting body of evidence suggested that companies in all sectors were over-confident in their global procurement capabilities.

According to a new study from TMX Global, supply chain woes are now costing the UK economy over £12 billion a year in lost revenue. The end-to-end supply chain consultancy launched its first European hub in London earlier in 2023, and believes that even more money may be on the line in the future, if firms do not act now.

TMX Global UK Head of Country, Gerry Power, said, “We’re far from being out of the woods; the UK economy is set to shrink by 0.2%. While global supply chain disruption is easing slightly, challenges such as delays, capacity constraints, congestion and elevated prices continue to impact the bottom line, costing businesses across the nation more than £12.2 billion in lost sales.”

Noting that businesses are soon to contend with a rise to corporation tax, Power suggested these losses could already have been the difference between continuation or collapse for some firms – with insolvencies running high across the UK. Looking ahead, there may be further issues which arise – so firms cannot afford to assume supply chain issues will ease now.

Power noted, “The big question is whether these pressures fall away in the next few years, as the global supply chain adapts, or whether the costs will be forever ‘baked into’ the transport expenses of companies worldwide, pushing up inflation and the cost of living in the UK permanently.”

One example of this possibility came from a recent Capgemini study, which suggested that 25% of global trade is set to relocate in the next three years. Despite this advanced warning, one-fifth of firms are still ill-equipped to handle this further supply chain disruption. At a time of massive economic uncertainty around the world, and in the UK, this is starting to have a drastic impact on the economy.

At the same time, the legacy of the UK’s exit from the EU continues to loom large. EU suppliers remain hesitant to do business with the UK, and 80% of UK businesses cite Brexit as the biggest supply chain disruptor, despite having had years to adapt to the divorce. This impact is illustrated by the International Monetary Fund’s paper ‘Supply Bottlenecks: Where, Why, How Much, and What Next?’ The research found that while supply constraints cost the UK and eurozone significant growth, without their impact the UK’s GDP growth could have been 6% higher in 2021, compared to 2% in the eurozone.

Power added, “Analysis from the IMF reveals half of the rise in manufacturing producer price inflation would not have occurred in the absence of supply bottlenecks – and the blow to the economy from supply chain disruption is equivalent to about one year’s growth in normal pre-pandemic times for many countries throughout Europe.”